Expectations are extremely bullish for Amazon (NASDAQ:AMZN) stock as it prepares to issue its latest earnings today. Third-quarter financial results from technology companies have been hit-and-miss. Microsoft (NASDAQ:MSFT) knocked it out of the park with its Q3 print, Alphabet (NASDAQ:GOOG/NASDAQ:GOOGL) not so much.
Seaport Research Partners issued a “buy” rating on AMZN stock along with a $145 price target, implying 15% upside from current levels, ahead of the third-quarter results. Much of the enthusiasm for Amazon’s stock stems from the company’s new prescription drug offering that it has made available to its Prime members, which many analysts see as a strong differentiator for the company.
Cheaper Medications for Prime Members
Billing it as a perk for Prime members, Amazon is now offering an add-on called RxPass that allows its U.S. subscribers to access 50 generic medications that, combined, treat more than 80 chronic conditions, including high blood pressure and diabetes.
The service costs an additional $5 a month per Prime membership and delivery of the medications is free. Analysts have praised the pharmacy perk as a great incentive to further drive Amazon Prime memberships and diversify the company’s operations, which have moved beyond e-commerce to now include grocery sales and film and television production.
It’s still early days for the RxPass benefit offered by Amazon. However, the company says it gives Prime members discounts of up to 80% on generic medications and 40% off on brand-name prescription drugs.
Approximately 150 million Americans are on at least one medication included in the RxPass formulary list, according to Amazon. While RxPass is not available for people on Medicaid or Medicare, Amazon has said that it plans to steadily expand the list of medications offered through the Prime membership perk.
Healthcare is an area that Amazon has targeted for growth. Since 2020, the company has been aggressively pushing into the healthcare field, which it sees as ripe for disruption. Amazon launched its online pharmacy in 2020 following the acquisition of PillPack in 2018.
The new RxPass generic drug offering builds on the company’s online pharmacy. While not all of Amazon’s healthcare ventures have been successful (it has shutdown a telehealth service called Amazon Care), the company continues to make healthcare a priority, acquiring in July of this year boutique primary care provider One Medical for $3.9 billion.
Other Reasons to Be Bullish on AMZN Stock
Beyond healthcare, there are many other reasons to be bullish about AMZN stock. The company’s main e-commerce business now seems to be back on track after aggressive cost controls were undertaken by CEO Andy Jassy.
Earlier this year, Amazon cut more than 25,000 workers as it sought to slim down after overextending itself during the Covid-19 pandemic. The company also cut or paused several major projects, including construction on a second headquarters it had planned for outside of Washington, D.C. The belt tightening should be reflected in Amazon’s upcoming Q3 print.
Amazon continues to push into new areas, notably artificial intelligence. The company has announced plans to invest up to $4 billion in AI start-up company Anthropic, which is a rival to ChatGPT creator OpenAI.
Amazon said its cloud customers will be given access to Anthropic’s technology through its Bedrock AI platform for businesses.
Anthropic will use Amazon Web Services’ in-house microchips to build, train and deploy its AI software and make AWS its primary cloud provider. Analysts sees this is a another positive growth catalyst for Amazon and AMZN stock.
Buy AMZN Stock
The Q3 print will cast the ultimate verdict on Amazon and its share price will rise or fall accordingly. However, heading into earnings, Amazon looks extremely attractive.
The company’s new RxPass offering for Prime Members should help to drive new subscriptions and keep customers loyal, as well as provide an additional revenue stream for the company.
At the same time, Amazon’s core e-commerce business looks healthy and the company is pushing into exciting new areas such as AI. The wind is again in Amazon’s sails after a bruising downturn in 2023. While the share price has gained 42% year to date, there looks to be more room to run in coming months. AMZN stock is a buy.
On the date of publication, Joel Baglole held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
